“Come On, Stop Toying With Us”

“Come On, Stop Toying With Us”

Catching up on my mail:

“I just purchased your “Top 5 Havens Of The Americas Special Collection” and, with it, received Rebecca Tyre’s report on “44 Things You Must Know Before You Relocate, Retire, or Invest Offshore.” Reading through this report, I note that the information on obtaining a residency visa in Ecuador is out of date.

“One has either to deposit US$25,000 in an Ecuadorian bank or purchase real estate for at least that amount, and one cannot leave the country on a resident visa for more than three months per year for the first two years and then six months after that.”

— Shawn S., United States

Editorial Assistant Rebecca Tyre replies:

“I believe you’re referring to the particulars related to obtaining a Real Estate/Securities Investor Visa, dear reader. My reference in the “44 Things” report has to do with obtaining a Retiree Visa.

“You can qualify for a retirement visa in Ecuador by showing as little as US$800 a month in guaranteed income. The income can come from a pension, Social Security, or an annuity, and it must be deposited each month in an Ecuadorian bank.

“To obtain a Real Estate/Securities Investor Visa, on the other hand, as you point out, you must make a minimum investment of US$25,000 in either a piece of real estate or a security (as the name of the visa suggest).

“You are correct in pointing out that, once you receive your Ecuadorian residency visa, you cannot leave the country for more than three months a year for the first two years your visa is valid. After the first two years, however, you can be outside the country for up to 18 consecutive months without losing your resident status.”

***

“Come on, please stop toying with us about retiring on the cheap to exotic, beautiful lands far away. You get our attention with live on Social Security for US$600 to US$700 per month, but then you tell us how much money we must have in bank accounts and monthly income, etc., etc., to qualify for residency.

“I live in Texas, and this is the cheapest warm weather with beaches and lakes location you can imagine, but I want someplace exotic. Must I be wealthy American to be welcomed?”

— Bridgette M., United States

Yes, some countries require money on account in a local bank, an investment in real estate, purchase of some security, or some other lump-sum investment to qualify for a full-time residency visa.

Some, but not all.

You’re welcome as a retiree in Belize, dear reader, from the ripe age of 45, if you can show as little as US$2,000 a month in income. No lump-sum investment is required. This is the world’s most user-friendly jurisdiction when it comes to full-time foreign residency. It’s also a tax haven…and a beautiful sand-fringed nation with a long Caribbean coast. Where the people speak English.

As Rebecca explains above, you’re welcome to take up full-time residency in Ecuador if you can show an income of as little as US$800 a month from a pension, Social Security, or an annuity.

In Panama, you qualify for full-time pensionado status if you can show “retirement” income of at least US$1,000. And Uruguay will roll out the welcome mat if you can show a guaranteed income of just US$500 a month.

Remember, though, that these are the requirements for full-time foreign resident status. Most countries will welcome you as a visitor for up to six months without any of these kinds of stipulations. That is, you can “live” in many countries up to six months at a time with no more than tourist or visitor status.

Be a perpetual retiree (like our own intrepid Correspondents Paul and Vicki Terhorst). Choose two or three exotic overseas havens. Spend three or four or five months at a time in each one. You’ll avoid the permanent resident hassle altogether. And, oh, the tales you’ll have to tell.

***

“I am living in Switzerland and thinking about moving to Belize. Could you tell me where I could find information about the cost of living, housing, etc.?”

— Oliver B., Switzerland

Belize Correspondent Ann Kuffner replies:

“The best website for up-to-date information on costs, finding a place to live, etc., in this country is www.ambergriscaye.com. Although you would expect it to focus on Ambergris Caye and San Pedro, it covers the entire country, with sections for each District. There are Forums on everything from living costs to real estate and employment. The Forums are very active, and questions are typically answered by expats already living here.

“Also note that Ambergris Cays now boasts a Multiple Listing Service. If you are interested in this part of the country (it’s where I’m living…and I couldn’t be happier), you’ll want to connect to that service.”

***

“Kathleen, I love the Austrian countryside. Do you have any suggestions for where I might consider for retirement, apart from Austria itself?”

It’s not easy in the current climate to open a bank account anywhere, but, in my experience, it’s no more difficult in Panama than anywhere else.

You’ll need personal and professional references plus two bank references. Some banks will waive the two bank reference requirement, as most Americans typically have only one bank account. In some cases, when the second reference is required, it can come from a credit card company.

Most bank personnel in Panama don’t speak English, so if you don’t speak Spanish and don’t want to pay your attorney to help you to open an account (the cost is typically US$500), then stick with HSBC or Scotiabank, where account managers typically do speak enough English to help you navigate the process.

***

“I think the issue that is not much discussed is taxes.

“If you are U.S. citizen, you will pay U.S. taxes no matter where you live. Especially if you are receiving Social Security.

“And then there is the issue of the additional taxes that you will pay in your new retirement country.

“This subject doesn’t seem to get much attention at all.”

— Thomas B., United States

Yes, we Americans abroad have it tough. We have two tax-masters, for we never lose our obligation to Uncle Sam and we assume a tax obligation in any new jurisdiction where we take up residence.

That does not mean, however, that we owe double the taxes. In fact, it is possible for an American abroad to reduce his overall tax burden significantly, even to live tax-free. For, having a tax obligation means you must file a return. It does not mean you owe tax.

As you point out, dear reader, it depends where your income is derived.

An American residing abroad full-time can take advantage of the Federal Earned Income Exclusion, meaning he owes zero tax to Uncle Sam on his first US$91,400 of earned income (that’s the amount for 2009).

Furthermore, if Social Security is your only income, you generally aren’t going to pay income taxes on it to the IRS either. This is true whether you’re living in the United States or anywhere else in the world. You pay tax on Social Security income only if your total adjusted gross income breaks certain levels (see the IRS website for the calculations).

Neither, necessarily, will you pay tax locally on your Social Security income. It depends on the jurisdiction. Retire to Belize, Panama, or Uruguay, for example, and you’ll pay no local income tax on your Social Security income (only on money earned locally…meaning that, as long as you earn no money locally, you pay no local income tax).

Yes, this gets complicated, but, please, dear reader, don’t assume that your tax situation will worsen as a retiree abroad. It could improve tremendously. It depends on your circumstances and on the retirement haven where you choose to relocate.

Kathleen Peddicord

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